as the least fertile and worst situated farm which it is just worth
while to cultivate (of which more will be said when we come to the
phenomenon of rent), but we must assume it to be cultivated by a
farmer of average ability.


§5. _Some Consequences of a Higher Price Level_. The foregoing
controversy will be of service to us, if it makes clear the manner and
the spirit in which the marginal conception should be handled. It
should be regarded not as a rigid formula which we can apply to
diverse problems without considering the special features they
present, but rather as a signpost which will enable us to find our
way, a compass by which we may steer between the shoals of triviality
and sophistry to the crux of any problem with which we have to deal.
Let us illustrate its practical uses by an example which is of great
interest and far-reaching practical importance at the present day. As
has been already observed, the war has left behind it in all countries
a great and almost certainly permanent increase in nominal purchasing
power. Since the armistice prices have moved upwards and downwards
with unprecedented violence; and it would be very rash to prophesy the
precise level at which they will ultimately settle (using that word
with considerable relativity). But, for reasons for which the reader
is referred to Volume II in this series, it is safe enough to say that
the general level of post-war will greatly exceed that of pre-war
prices. Now this will apply not only to consumers' goods like milk and
clothes, or to raw materials like pig-iron and cotton, but in very
much the same degree to things like factories and machinery. Things of
this last type are sometimes called "capital goods," because it is in
them that a large part of the capital of a business is embodied. Now
the fact that it will cost much more than it did before the war to